More Capital Group Sites

Jonathan Bell Lovelace believed that fundamental research is essential to achieving superior long-term investment results. The small company he founded in 1931 has grown into one of the world’s most respected financial institutions.

American Funds® Survey Finds Experience Shapes Each Generation’s Outlook on Markets and Retirement; Majority of Respondents Have Blind Spots About Their Retirement Investments

LOS ANGELES, September 28, 2016 – Nearly two-thirds (63%) of Gen Xers are kept up at night thinking about financing their retirement, and one in three is worried they’re not earning enough money to be able to invest for the future, according to a survey by American Funds, a family of mutual funds from Capital Group, one of the world’s leading investment management firms.

“After experiencing the dot-com bust, the global financial crisis and the housing collapse, as well as stagnant wage growth during their formative adult years, Gen Xers — or Generation AnXious — are wary about their financial future,” said Heather Lord, senior vice president and head of strategy and innovation at Capital Group. “Perhaps because of these concerns, Gen Xers long to do better than the average market and say actively managed funds can help them reach these goals.”

While investors across all three generations believe it is important to strive for superior results – and to limit losses during market downturns — the survey identified a low level of awareness about the downside risks of index funds.

“Every generation is interested in achieving better investment outcomes over time and limiting losses in market downturns, combined with low fees,” said Lord. “But each generation has blind spots around index funds, which experience the full downside of market drops. Baby Boomers, especially, are unaware of those risks – and they’re the ones with less time to rebuild their nest eggs from a market downturn.”

Wisdom of Experience: Lessons Learned From Millennial, Generation X and Baby Boomer Investors surveyed over 1,200 U.S. adults, focusing on Millennials (21-36 years old), Generation X (37-51 years old) and Baby Boomers (52-70 years old), to understand their perspectives on a range of investing and retirement issues.

Key findings include:

Blind Spot – Index Funds: Only half of investors (54%) are aware that index funds expose them to the full impact of market volatility, as well as risk of losses during market downturns

Buy and Hold – Invest for the Long-Haul: All generations feel smarter when they stick with a long-term investment strategy, with nearly two-thirds (65%) of Boomers adhering to this buy-and-hold mindset

Message Received – Start Saving Early: Fifty-nine percent of Millennials began saving for retirement before age 25, compared to 42 percent of Gen Xers and 28 percent of Boomers

Don’t Settle for Average: Results, Fees and Blind Spots

All three generations understand that a well-designed portfolio can do better than average, but most don’t know what to look for when trying to identify funds that can deliver long-term above-average market results.

Investors want to do better than average. Seven in 10 (69%) investors said that a diversified strategy — incorporating both actively managed mutual funds and passive index funds — can help investors achieve better returns.

Protecting the downside — safeguarding investments during a market downturn — is a key priority, particularly for Baby Boomers (81%). However, only half of investors (54%) are aware that passive index funds expose them to the full impact of market volatility, as well as risk of losses during market downturns. And even fewer (46%) see the risks of index funds for older investors who are less able to withstand market downturns and have less time to rebuild savings.

Investor awareness of how to identify funds that beat benchmarks is extremely low. Two out of three investors (69%) have never heard of low fees as a success factor for identifying funds that outpace markets over time, and nearly 80 percent have never heard of high manager ownership in the fund as a key success factor. High manager ownership looks at the amount fund managers invest in the funds they manage, signaling managers’ commitment to fund holders.

That said, 64 percent of investors said they would feel more comfortable investing in a fund where a significant amount of the manager’s own money is invested alongside them, and most agree that such funds are more likely to do well for investors.

Age and Gender Matter: Contrasting Outlooks on Markets and Retirement

Boomers have the lowest expectations about future market returns, but they have the most optimistic outlook on their retirement. For Millennials and Gen Xers, it’s the opposite — they are more bullish about the market, but less so about their own retirement.

Also, within each demographic, gender expectations differ: Men are a lot more optimistic than women about the investment outlook in the next 10 years, while women have a more positive outlook than men when it comes to the next two or three decades.

Over the next 10 years, only 16 percent of Boomers expect the market to do as well as the last five years of relatively strong returns — while nearly twice as many Millennials (31%) and Gen Xers (28%) picked the most bullish scenario.

Half of all Boomers (48%) expect market returns to be lower than historical averages over the next two to three decades, compared to one in three (29%) Millennials and Gen Xers.

Six out of 10 (61%) Baby Boomers expect to feel satisfied on their 100th day of retirement, compared to only 40 percent of Gen Xers and 43 percent of Millennials.

When asked to select which financial concerns keep them up at night, including having enough money to retire with peace of mind and being able to ensure care for self or family member, 37 percent of Boomers said “None of these.”

Life’s Lessons: Generational Habits Shaped by Experience

Each generation has taken the need to start saving early more seriously. Fifty-nine percent of Millennials began saving for retirement before age 25, compared to 42 percent of Gen Xers and 28 percent of Boomers. And a quarter of Millennials believe children born today should start saving for retirement even before their 18th birthday.

Despite concerns of Millennials about saving enough money for retirement, they do dream big. They expect to retire later than Boomers, but are least likely to expect to keep working part-time. Two-thirds of Millennials want to spend their time in retirement “traveling the world.”

All three generations agree that sticking with a long-term investment strategy makes them feel smarter as investors, with nearly two-thirds (65%) of Boomers adhering to this buy-and-hold mindset compared to 49 percent of Gen Xers and 43 percent of Millennials.

Boomers also have the most altruistic views about volunteer work, and are twice as likely as Millennials to say they would like to donate to causes they are passionate about in retirement.

About Capital Group

Since 1931, Capital Group has been singularly focused on delivering superior results for long-term investors using high-conviction portfolios, rigorous research and individual accountability. Today, Capital Group manages more than US$1.39 trillion in equity and fixed income assets for millions of individual and institutional investors around the world.*

The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses and summary prospectuses, which can be obtained from a financial professional, and should be read carefully before investing. Similar information about collective investment trusts can be obtained from Capital Group or participants’ plan provider or employer.